Starbucks Corporation, the leading global coffee chain, has upheld its full-year outlook despite witnessing a decline in its fiscal third-quarter results, indicating that sales fell short of Wall Street's expectations. The company, which operates thousands of coffee shops worldwide, continues to predict per-share adjusted earnings growth to remain in a range from flat to a low single-digit percentage for fiscal 2024.
In a recent announcement, Starbucks signaled confidence in its performance over the coming year by asserting that global revenue is still expected to rise, albeit modestly by low-single digits, while comparable store sales are projected to trend flat to a slight decrease. In premarket trading on Wednesday, Starbucks' stock rose by 1.9%, reflecting a degree of investor optimism.
Chief Financial Officer Rachel Ruggeri, addressing analysts during the earnings call, expressed satisfaction in reaffirming the full-year guidance metrics. "Our confidence is underpinned by the result of our action plans, coupled with the continued efficiency unlock both in and out of store," Ruggeri remarked. For the period ending June 30, adjusted earnings per share (EPS) dipped by 7% to $0.93, aligning with the consensus estimate compiled by Capital IQ.
The company's revenue also saw a decrease, falling to $9.11 billion from $9.17 billion a year prior, which was below analysts' projections of $9.25 billion. A key driver behind the revenue decline was a 3% drop in global comparable store sales, which contrasted with a 2.8% decrease that analysts had anticipated.
Specifically, transaction rates fell by 5%, although this was somewhat mitigated by a 2% increase in average transaction value, indicating a shift in consumer behavior towards higher-value purchases. Ruggeri highlighted the progress being made in executing the company's comprehensive three-part action plans, stating that efficiency efforts have exceeded expectations and have helped to partially counteract investments necessitated by a challenging consumer landscape. Across the United States, same-store sales were down by 2%, but the combination of adjusted pricing strategies and multi-beverage orders contributed to a 4% rise in the average ticket value.
Conversely, international comparable sales suffered a more significant decline of 7%, particularly influenced by ongoing economic pressures in regions including the Middle East, Southeast Asia, and various parts of Europe. Notably, China experienced a steep 14% drop in same-store sales, as ongoing competitive challenges and decreased consumer spending levels impacted performance, according to Chief Executive Laxman Narasimhan. Despite these challenges, Starbucks' shares rose 2.7% during premarket trading on Wednesday.
In light of the recent performance, Wedbush Securities adjusted its price target for the company's stock from $77 to $80, while maintaining a neutral rating. Analysts led by Nick Setyan remarked, "We believe SBUX's current valuation appropriately reflects increasingly limited (near-term) top- and bottom-line visibility, offset by some level of confidence in management's ability to deliver longer-term annual operating margin expansion and EPS growth in line with the brand's equity." In terms of profitability, Starbucks experienced a contraction in its operating margin, which narrowed by 60 basis points to 16.7%.
This decline was attributed to increased promotional activities and strategic investments in wages for store partners. Meanwhile, total operating expenses edged up by 0.2% to $7.67 billion. During this quarter, Starbucks expanded its global presence by opening 526 new stores, further showcasing its commitment to growth and market penetration despite current economic headwinds. As of the latest trading data, Starbucks' stock price stood at 78.23 with a change of +2.29, reflecting a percent change of +3.02.
Analysts continue to track the performance of $SBUX as the company navigates the complexities of the current market landscape, maintaining an optimistic outlook for the future..